Wednesday, April 20, 2011

Daily Market Commentary: Dow Breakout

There was no shortage of action in the markets, but the index with the clearest push forward was the Dow.

The Dow managed a clear break of 2011 resistance on heavy volume. The MACD lies just shy of a bullish cross (above the bullish zero line), but when it does, technicals will be net bullish.

($INDU)

via StockCharts.com

The break in the Dow is good news for the S&P. While the index lies below 1,343 resistance (a break of which would qualify a new 2011 high), there was a powerful gap above both 20-day and 50-day MAs on higher volume. Watch for upside follow through over the coming days.

($SPX)

via StockCharts.com

The other index to perform well was the Russell 2000. Having ably defended its 50-day MA it went on to negate the bull trap and redefine resistance at 855. As it works towards restoring its market leadership qualities it will drive gains for lagging indices like the S&P and Nasdaq.

($RUT)

via StockCharts.com

The index to recover the most was the semiconductor index. Having traded at a position of vulnerability, it subsequently gapped powerfully higher, negating the prior bull trap and putting shorts to flight. Technicals improved and it even managed a resistance breakout. The only negative point was its failure to close above its 50-day MA. It would take a brave short to attack it here.

($SOX)

via StockCharts.com

The only disappointment, not from a straight % gain perspective but in the manner it traded the day, was the Nasdaq. A second hammer candlestick on huge buying volume marked an index which posted the gain, but failed to build on it. If there were doubts on today's action, the Nasdaq expressed it.

($COMPQ)

via StockCharts.com

For tomorrow, the Nasdaq and Semiconductor index are likely to fight it out to decide if bulls or bears have control. The gains in the semiconductor index should be enough to help the Nasdaq, but sometimes you can never tell (just as today's gain really changed the semiconductor index).

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Dr. Declan Fallon is the Senior Market Technician and Community Director for Zignals.com. I offer a range of stock trading strategies for global markets which can be Previewed for Free with delayed trade signals. You can also view the top-10 best trading strategies for the US, UK, Europe and Rest-of-the-World in the Zignals Trading Strategy Leaderboard. The Leaderboard also supports advanced search capability so you can tailor your strategies to suit your individual requirements.

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